SINGAPORE/BEIJING, Oct 3 Iran's total crude oil
and condensate sales likely reached around 2.8 million barrels
per day in September, two sources with knowledge of the matter
said, nearly matching a 2011 peak in shipments before sanctions
were imposed on the OPEC producer.

The run-up from shipments of around 2.5 million bpd in
August comes mainly from condensate, a light oil excluded from
OPEC supply quotas that is often produced with natural gas and
can be used to make naphtha for petrochemical production.

Iran sold 600,000 bpd of condensate for September, including
about 100,000 bpd shipped from storage, to meet robust demand in
Asia, the two sources said. September crude exports increased
slightly from the previous month to about 2.2 million bpd, they
said.

Iran, along with Libya and Nigeria, is allowed to produce
"at maximum levels that make sense" as part of any output limits
in a surprise deal reached last week by the Organization of the
Petroleum Exporting Countries (OPEC).

Still, the Middle Eastern producer has surprised the market
by ramping up its oil output faster than expected, to 3.63
million bpd in August, according to OPEC, up a quarter from
end-2015 since sanctions were lifted in January.

"Iran cannot produce much more than the present, so around
3.7 million bpd may be the max," said Fereidun Fesharaki,
chairman of consultancy FGE.

Even if Iran's output hit 3.8 million bpd - as an oil
official said it had in September - it would not be able to
sustain that volume as decline rates at its oilfields are about
400,000 bpd each year, Fesharaki said.

National Iranian Oil Co (NIOC) officials did not immediately
respond to an emailed request for comment.

Iran has said it plans to raise its output to 4 million bpd,
although other analysts agreed production has probably peaked
for now because investments to pump out more oil are lagging.

SOUTH PARS CONDENSATE TO PUSH GROWTH

Condensate instead of crude oil will drive Iran's export
growth for the remainder of 2016, thanks to developments at its
giant South Pars gas field, the sources said.

NIOC drew on condensate stocks from floating storage and
onshore tanks in September to help meet growth in demand from
China, South Korea, Japan and India.

Iranian ports loaded 2.153 million barrels of crude and
486,000 bpd of condensate in September, according to Thomson
Reuters Supply Chain and Commodities Research. That put the
month's total at 2.639 million bpd - excluding the condensate
loaded out of storage - up from 2.472 million bpd in August, the
Reuters data showed.

Condensate sales could reach 800,000 bpd in October, in
excess of production at about 550,000 bpd, one of the sources
said, suggesting further draws from floating tankers.

"Korea was the main demand driver for the growth. Japanese
and Indian plants were also raising imports," said one of the
two sources with knowledge of the matter from Beijing, adding
that China's Sinopec has also boosted its offtake of
condensate since August.

Iran will sell another 2 million barrels, or about 66,000
bpd, of South Pars condensate each month to Hyundai Chemical in
Daesan between October and December, the two sources said.

Iranian condensate will meet about 70 percent of the
feedstock demand at a new Hyundai Chemical splitter jointly
operated by Hyundai Oilbank Co and Lotte Chemical
.

A Hyundai Oilbank spokesman declined to comment.

According to trade flow data on the Thomson Reuters Eikon
terminal for Iran condensate that discharged in September, about
one-third went to South Korea, with the rest going to the United
Arab Emirates, India, China and Japan.

Iran's South Pars condensate is usually sold at small
premiums to Dubai quotes, free-on-board, much lower than Qatari
condensate, which sells at premiums of $2-$3 a barrel, trade
sources said.

(Reporting by Florence Tan in SINGAPORE and Chen Aizhu in
BEIJING; Additional reporting by Jane Chung in SEOUL and Mark
Tay in SINGAPORE; Editing by Tom Hogue)

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